Business this week: 17th – 23rd February 2007

Business this week

Feb 22nd 2007
From The Economist print edition

In a closely watched decision America’s Supreme Court overturned punitive damages of $79.5m against Philip Morris that were handed down by a jury in 1999. The case centred on an Oregon man who had smoked for 42 years and died of lung cancer. The Supreme Court ruled that the jury’s award to his widow had overstepped the mark by punishing the cigarette-maker for harm done to others, but it failed to set any limits on future punitive-damage awards and sent the case back to Oregon’s state Supreme Court for a new hearing. See article

The European Commission slapped its biggest-ever antitrust fine, €992m ($1.3 billion), on five lift manufacturers it accused of operating a cartel. Germany’s ThyssenKrupp and America’s Otis were among the companies the commission said had “artificially bloated” the construction and maintenance costs of buildings in European countries.

Transmission problems

After years of intense rivalry, Sirius and XM announced their intention to merge. Once considered the new kids on the block, the satellite-radio networks have been struggling to respond to competition from recent advances in broadcasting, such as through the internet. Their merger is far from certain; America’s communications and antitrust regulators promised that the $4.6 billion deal will be heavily scrutinised. See article

Google encroached further into Microsoft’s territory by offering businesses a new set of web-based word-processing and spreadsheet services. The internet company released a similar package to consumers last year.

Another effort is under way to combine Warner Music and EMI. Warner confirmed it had approached EMI after obtaining support from IMPALA, the trade group for independent music-labels in Europe. Last year IMPALA complained to the EU that consolidation among big music companies would hurt competition.

The board of Portugal Telecom rejected an improved €11.8 billion ($15.5 billion) bid from Sonae, a Portuguese conglomerate, and bolstered its defences by announcing a €6.2 billion shareholder-remuneration package. The saga of what would be Portugal’s biggest takeover has been rumbling on for a year.

Conquistadors

Banco Bilbao Vizcaya Argentaria made its biggest acquisition outside Spain when it agreed to buy Compass Bancshares in a $9.6 billion transaction. BBVA has been steadily increasing its business in the southern and south-western United States, on account of the region’s growing Hispanic population. Compass, based in Birmingham, Alabama, operates more than 415 banks from Arizona to Florida, including 164 in Texas.

Sberbank, Russia’s largest savings bank, looks likely to have raised $8.8 billion from its share offering, the country’s second-biggest following last year’s issue by Rosneft, an oil firm. Sberbank’s sale raised a bit less than had been forecast by analysts. Some investors had grumbled that the prospectus was only available in Russian and that the bank (unlike Rosneft) won’t be selling shares on foreign exchanges.

HSBC replaced the head of its North American unit, which has been reeling from losses in the subprime mortgage market. Meanwhile, the share price of NovaStar Financial plunged by 40% as it revealed losses in the subprime market.

EADS, the parent company of Airbus, delayed launching a long-awaited restructuring plan because of “cross-national” difficulties about job costs and workloads related to the A350XWB. Last year Airbus was beset by production delays surrounding its A380 super-jumbo; both projects are crucial to Airbus’s future competition with Boeing.

A plan to merge India’s two biggest state-owned airlines, Air India and Indian Airlines, came closer to fruition after it was approved by the country’s aviation minister. The proposal will create a national carrier that could compete as one of the world’s top 30 airlines. The minister also said that a promised merger announced last month between two private domestic carriers, Jet Airways and Air Sahara, would be permitted.

Sweden’s Volvo agreed to buy the 81% of Japan’s Nissan Diesel it does not own in a SKr7.5 billion ($1.1 billion) deal. The combined company will overtake DaimlerChrysler to become the world’s biggest maker of heavy lorries.

Feeling less deflated

Japan’s Topix stockmarket index (a broader measure than the Nikkei) reached its highest level since November 1991, helped by share prices of big banks which rose in response to the Bank of Japan’s decision to raise interest rates by one-quarter of a percentage point, to 0.5%.

Politics this week: 17th – 23rd February 2007

Politics this week

Feb 22nd 2007
From The Economist print edition

articles from this week’s edition of The Economist
George Bush and Congress | A double spring offensive in Afghanistan | Canadian federalism | Italy’s government crisis | A repressive Ethiopia | A terrorist bombing in India | Germany’s car industry | The diamond industry | The Bank of Japan raises rates | Places in the sun | Dangerous asteroids | Africa and the CIA | Maurice Papon, collaborator

Reuters

Italy’s prime minister, Romano Prodi, tendered his resignation after only nine months in office. He did so after a mutiny in his sprawling coalition led to the defeat in the Senate of government proposals to keep troops in Afghanistan. See article

Tony Blair said the number of British troops in Iraq would fall from around 7,100 at present to around 5,500 in the next few months, but that a British military presence would remain there at least into 2008, “for as long as we are wanted”. Denmark said it would withdraw all its 470-odd troops by August. See article

The commander of Russia’s strategic forces warned Poland and the Czech Republic that they could be targeted with nuclear weapons if they agree to host American anti-missile defence bases. America says the radar and rockets are designed to counteract Iranian missiles, not Russian ones. See article

Poland’s governing Law and Justice party is suing the country’s former president, Lech Walesa, for defamation. Mr Walesa called the current incumbent, Lech Kaczynski, a “blockhead” in a row over a report on alleged criminal activity and Russian influence in the country’s now disbanded military-intelligence service. See article

Ségolène Royal, the Socialist candidate for the French presidency, rejigged her campaign, promising more help for the low-paid and shuffling her advisers. Polling had shown her lagging Nicolas Sarkozy, her centre-right opponent, by ten points.

European Union environment ministers agreed in principle to cut greenhouse-gas emissions by 20% from 1990 levels by 2020. The plan, and the list of countries which will take most of the burden, must be agreed to by heads of state.

Judicial review

An appeals court in America ruled that suspected terrorists held at Guantánamo Bay do not have the right to challenge their detention in a federal court. The decision upholds legislation passed by Congress last autumn that was written to clarify the law, but the issue may end up yet again in the Supreme Court.

The Democrats failed to break a Republican filibuster in the Senate that would have allowed a vote on a resolution criticising George Bush’s policy in Iraq. Seven Republicans, including John Warner, the former chairman of the Armed Services Committee, joined the Democrats. The House of Representatives passed a similar resolution last week.

John McCain went to Iowa and Florida, where he courted social conservatives by proclaiming his strong support for anti-abortion legislation. The Arizona senator is expected to announce his bid for the White House next month.

An attack on peace

AFP

Two bombs exploded on the Friendship Express, a train travelling from Delhi in India to Lahore in Pakistan. In the ensuing inferno, at least
68 people, mostly Pakistanis, died. Indian experts suspected Islamic militants with bases in Pakistan, but the two countries said the atrocity would not affect their peace process. Their foreign ministers went ahead with planned talks in Delhi, where the two countries signed an agreement on reducing the risk of accidental nuclear conflict. See article

A United Nations special rapporteur, Philip Alston, accused the army in the Philippines of being in a state of denial about a spate of extra-judicial killings “convincingly attributed” to the security forces.

Muhammad Yunus, founder of Grameen, a big microfinance institution, entered into Bangladeshi politics with the formation of a new party. Separately, the military-backed government said it would take eight to ten months to prepare the voter-identity cards needed for an election. See article

Too close for comfort

Colombia’s foreign minister, María Consuelo Araújo, resigned after her brother, a senator, was arrested over allegations that he received cash from right-wing paramilitaries. The escalating scandal over links between the paramilitaries and pro-government politicians has brought criticism of the government of Álvaro Uribe from the United States Congress, which provides Colombia with around $600m a year in aid. See article

Jean Charest, the Liberal premier of Quebec, called a provincial election for March 26th. Opinion polls give the Liberals a five-point lead over the separatist Parti Québécois. See article

The crackdown on drug-traffickers by Mexico’s president, Felipe Calderón, continued as 3,000 troops were sent to two states bordering the United States and an assistant state prosecutor was arrested over alleged links with a drug gang. Meanwhile, gunmen in the border city of Nuevo Laredo shot and wounded a federal congressman.

According to his niece, Fidel Castro is in “stupendous” condition and will be “very active” again as he recovers from stomach surgery that led him to hand over his powers as Cuba’s president to his brother, Raúl.

Blowing another raspberry

Iran ignored a UN deadline to suspend its uranium-enrichment programme by February 21st or face wider sanctions. After the International Atomic Energy Agency, the UN‘s nuclear watchdog, meets early next month, the UN Security Council will have to decide on further steps to try to squeeze Iran into compliance. See article

AFP

The American secretary of state, Condoleezza Rice, met the Israeli prime minister, Ehud Olmert, and the Palestinian president, Mahmoud Abbas, together in Jerusalem, but appeared to have made scant progress towards restarting a peace process in earnest. See article

Rival Palestinian parties, meanwhile, continued to argue over the interpretation of their agreement signed earlier this month in Mecca, where they were supposed to have settled the terms of a national unity government.

The UN Security Council authorised the African Union to send peacekeepers for six months to Somalia, where Islamists were routed last month by troops from Ethiopia. It was unclear how soon the troops would arrive. Meanwhile, mortars, presumably launched by Islamist remnants, killed 16 people in the capital, Mogadishu.

Speaking on his 83rd birthday, Zimbabwe’s president, Robert Mugabe, seemed to confirm rumours of mounting intrigue within his ruling circle by accusing unnamed senior colleagues of plotting to oust him from office.

Politics this week: 10th – 16th February 2007

Articles from this week’s edition of The Economist Dealing with North Korea | The future of money | America’s primaries | Mexico’s Institutional Revolutionary Party | The insurgency in southern Thailand | What next after the intra-Palestinian peace deal? | Ségolène Royal unveils her programme | Britain’s philanthropists | Without Daimler, whither Detroit? | Bad mortgages threaten America’s banks | A practical quantum computer | Anna Nicole Smith, beleaguered bombshell More free articles »

Politics this week

Feb 15th 2007
From The Economist print edition

EPA

After tense talks in Beijing, North Korea,which in October tested a nuclear weapon, promised to shut down its main nuclear reactor in return for fuel aid. The talks, involving America, China, Japan, Russia and South Korea, also led to an agreement to resume ministerial talks between the two Koreas, and to take steps towards normalising America’s relations with North Korea. But the agreement makes no explicit mention of nuclear weapons, dismantling nuclear facilities or disposing of nuclear materials. See article

The foreign ministers of India, China and Russia met in Delhi to discuss the state of the world. It was the first such high-level meeting between China and India since China alarmed potential adversaries by testing an anti-satellite missile last month.

In a surprising presidential election in Turkmenistan, Kurbanguly Berdymukhamedov won only 89% of the vote. Mr Berdymukhamedov had been acting-president since the death in December of Saparmurat Niyazov, who had ruled the country for more than two decades. The opposition was not allowed to field any candidates.

Malaysia’s prime minister, Abdullah Badawi, held talks with the Thai junta and offered to mediate to help end the Muslim separatist insurgency in southern Thailand. See article

Ma Ying-jeou, chairman of the Kuomintang, Taiwan‘s main opposition party, resigned after being formally charged with corruption offences. But he also announced his intention to stand in next year’s presidential election. See article

A house divided

The two main Palestinian factions, the Islamists of Hamas and the secular Fatah, agreed in Mecca to form a unity government in the hope of stopping bloodshed between the groups’ militias and of ending a year-long international boycott of the Hamas-run Palestinian government. Hamas refused to recognise Israel but said it would “respect” (not precisely accept) past Palestinian agreements with it. See article

Just as Iraq’s prime minister, Nuri al-Maliki, was making a speech to mark the anniversary of the bombing of one of the Iraqi Shias’ holiest shrines, in Samarra, a huge bomb went off in Baghdad, killing at least 80 people. Other bombs continued to make sectarian mayhem, as America’s promised “surge” of thousands of extra troops into Baghdad was set to begin. See article

EPA

Seven simultaneous bombings killed six people near Algeria’s capital, Algiers. A group calling itself the al-Qaeda Organisation in the Islamic Maghreb, perhaps a new version of the previously better-known Salafist
Group for Call and Combat, said it was responsible, raising fears that al-Qaeda has activated a north African front.

Guinea’s president, Lansana Conté, who has been facing growing demonstrations against his 25-year-old dictatorship, declared martial law amid increasing violence. Most businesses have shut down; some embassies have told their citizens to leave.

Ugandan MPs approved the contribution of 1,500 troops as part of an African Union peacekeeping force in Somalia. They are due to replace the Ethiopian troops that helped to overthrow Somali Islamist militias last year. Burundi, Ghana and Nigeria have also promised troops.

The default option

Ecuador’s Congress voted to approve a proposal by the country’s new leftist president, Rafael Correa, for a Constituent Assembly to write a new constitution. Meanwhile the government, which has talked of defaulting on its debt, said it would make a payment that falls due this week. See article

Bolivia’s socialist president, Evo Morales, led troops into a tin smelter and declared its nationalisation. The smelter’s owners, Glencore, a Swiss mining firm, said they would claim compensation. The government claims the smelter’s privatisation in 1999 was fraudulent. See article

In need of sum ideas

The Socialist candidate for the French presidential election, Ségolène Royal, revealed a decidedly left-wing presidential platform. It included many promises of more public spending, but little on how to pay for it all. See article

French police arrested 11 suspected terrorists. Nine of them were allegedly al-Qaeda members thought to have been recruiting fighters to join the insurgency in Iraq. In Spain, the trial began of 29 people suspected of involvement in the 2004 Madrid train-bombings.

George Bush said Russia and America could still co-operate over many things despite an angry speech by Vladimir Putin, who denounced American militarism at a conference in Munich. See article

The European Parliament endorsed a report criticising several European governments for complicity in secret CIA flights used for extraordinary renditions. These included the kidnap and transport of suspected Islamist terrorists to third countries, in some of which they were tortured.

EPA

Portugal is to legalise abortion during the first ten weeks of pregnancy, after 59% of voters backed the change in a referendum. The turnout was below 50%, so the result was not legally binding, but the government pledged to act on the result in any case.

No more rubber stamps

The House of Representatives held a debate on Iraq. If, as was expected, a non-binding resolution opposing the deployment of extra troops is passed (the Democratic majority was expecting the support of some Republicans as well), it would represent the first time Congress has repudiated George Bush’s policy on the war.

Mitt Romney announced he was entering the race for president. The former one-term Republican governor of Massachusetts, who is a Mormon, has been steadily polishing his credentials with social conservatives, especially over the issue of gay marriage. See article

Meanwhile, Barack Obama officially launched his campaign from the steps of the Old State Capitol in Springfield, Illinois, the place where Abraham Lincoln forged his political career.

A year after Larry Summers said he was quitting the job amid a furore over his comments on differences between the sexes, Harvard University picked a new president. Drew Gilpin Faust is the first woman to hold the post.

Business this week: 10th – 16th February 2007

Business this week

Feb 15th 2007
From The Economist print edition

A cost-cutting programme at Chrysler was unveiled. The troubled carmaker made an operating loss of $1.4 billion last year and now more than 13,000 jobs are to go. Chrysler’s parent company, DaimlerChrysler, said it could find partners for its North American division, but a sale was not ruled out either. See article

The European Court of Justice’s advocate-general rejected the German law protecting Volkswagen from takeovers. This was seen as boosting the potential of a bid for VW from its biggest shareholder, Porsche. It also solidifies the role of Ferdinand Piëch, who is a member of the Porsche family, as VW‘s chairman. The premier of Lower Saxony, which is VW‘s second-biggest shareholder, acknowledged this by changing tack and ending his opposition to Porsche having a third representative on VW‘s board.

FirstGroup, a British bus and train operator, expanded its American business by agreeing to pay $3.6 billion for Laidlaw, which specialises in school and inter-city bus services. If successful, the deal will give FirstGroup a sizeable chunk of America’s school-bus market, but there was speculation it may sell Laidlaw’s other concern, the iconic Greyhound bus line.

It makes the world go round

A plan to boost the use of mobile money was unveiled at a telecoms conference. The project, set up between a group of mobile-phone operators and MasterCard, is targeted at migrant workers and enables funds to be securely transferred from one phone to another back home, where the credit can be spent. See article

Vodafone won the bidding to take control of Hutchison Essar, a mobile-phone operator in India, agreeing to pay $11.1 billion for the 67% stake held by a subsidiary of Hong Kong’s Hutchison Whampoa. Arun Sarin, Vodafone’s chief executive, said the deal would be “transformational” for his company, which thinks it can increase profits by acquiring phone operators in high-growth developing markets. But some of Mr Sarin’s critics said he had paid too much.

A court in Brussels ruled that Google had infringed the copyright of Belgian newspapers by publishing links to their stories on Google News. The case, in which the newspapers argued that the internet company was giving away articles they were charging for, was closely watched by other press proprietors. Google is to appeal.

Delta Air Lines made a fourth-quarter net loss of $2 billion as it booked charges related to its bankruptcy- restructuring plans.

Better to have loved and lost

NASDAQ‘s $5.3 billion hostile bid for the London Stock Exchange was spurned by shareholders (fewer than 0.5% accepted the offer). It was the second time in less than a year that NASDAQ‘s advances had been rebuffed and it joins a long line of suitors seen off by the LSE because, it says, they have not valued it properly. Speculation turned to the possibility of future partners for both bourses.

Deutsche Börse agreed to take a 5% strategic stake in the Bombay Stock Exchange, underlining the fashion for consolidation among global exchanges.

EMI‘s share price hit a low note after it issued its second profits warning of the year. The music company has been particularly hit by poor sales in North America, where, it said, the market for CDs had declined by 20% this year.

With the share prices of big aluminium companies rising amid rumours of takeovers, India’s Hindalco Industries said it would pay nearly $6 billion for Novelis, a Canadian maker of rolled aluminium used to make beverage cans. The deal is the second-biggest foreign acquisition by an Indian company and comes two weeks after Tata Steel won the battle for Corus.

SXR Uranium One and UrAsia Energy agreed to merge, creating the world’s second-biggest uranium miner. The price of the raw material for reactor fuel has more than tripled over the past three years, in line with the increased enthusiasm for nuclear power.

Gazprom said its third-quarter net profit rose by more than half, to $4.6 billion. The Russian gas monopoly is benefiting from rising exports and the higher prices it charges to former Soviet republics.

Time for another row

America’s trade deficit in goods reached $836 in 2006. Congressional Democrats seized on the figure to lambast the Bush administration and called for “actions to stand up for America” by ending the “unfair trade practices” of the countries and regions that account for most of the deficit: China ($233 billion), the European Union ($117 billion) and Japan ($88 billion).

Politics this week: 27th January – 2nd February 2007

Politics this week

Feb 1st 2007
From The Economist print edition

Scores of Iraqi Shias were killed by Sunni insurgent bombs and mortars during the Shias’ main religious festival, Ashura, while tit-for-tat killings in Baghdad and elsewhere continued. Earlier, near the Shias’ holy city of Najaf, American and Iraqi troops fought an advancing force of a breakaway Shia sect, killing at least 260 of them. The newly appointed overall American commander of troops in Iraq said that “time was short” for turning things round. See article

AP

In the first successful suicide-bombing for nine months inside Israel, a Palestinian from Gaza killed three people in a bakery located in a residential area in the Red Sea resort town of Eilat.

At the African Union’s annual summit in the Ethiopian capital, Addis Ababa, the president of Chad, Idriss Déby, denounced the president of Sudan, Omar al-Bashir, who failed in his attempt to win the organisation’s chair for the coming year; it went instead to Ghana’s president, John Kufuor. Mr Déby also assailed the AU itself for being “deaf and blind to ethnic cleansing” in Sudan’s western region, Darfur, where the killing has spilled over into Chad.

Also at the AU summit, Somalia’s interim president, Abdullahi Yusuf, agreed to hold a conference to try to reconcile his country’s many rival clans. But no agreement was reached on sending an AU peacekeeping force to take the place of the Ethiopian troops who recently invaded the country to sweep Islamist militias from power.

As a token of China’s growing interest in Africa, its president, Hu Jintao, began an eight-country, 12-day tour of the continent. Attention will be focused on his trip to Sudan where he will discuss international efforts to make peace in Darfur. See article

When’s the Royal visit?

Nicolas Sarkozy, the centre-right candidate for the French presidency, made an election-campaign visit to London, where there are thought to be some 300,000 French residents. A poll showed Mr Sarkozy pulling ahead of the Socialists’ candidate, Ségolène Royal. See article

Police in Britain arrested nine men suspected of planning to kidnap and murder a Muslim British soldier on leave from Afghanistan. See article

Germany ordered the arrest of 13 suspected CIA agents over the kidnapping, for five months, of a German national of Lebanese descent. Meanwhile, the foreign minister, Frank-Walter Steinmeier, was embarrassed by revelations that he had opposed the release of a German-born Turkish citizen held in Guantánamo Bay for four years. Investigators found no evidence of terrorist activity by the Turk, Murat Kurnaz. See article

Carla del Ponte, the United Nations war-crimes prosecutor at The Hague, urged the European Union not to resume talks with Serbia until it took steps to hand over Ratko Mladic, a Bosnian Serb general wanted for war crimes. The EU suspended talks last year in protest at Serbia’s failure to arrest Mr Mladic.

Forcing one’s hand

With threats of subpoenas hanging in the air, America’s attorney-general, Alberto Gonzales, agreed to hand over classified documents about the government’s (recently abandoned) domestic spying programme to a committee in Congress. Only selected legislators will be allowed to review the top-secret files.

AFP

Washington, DC, witnessed its biggest anti-war rally in a while. By some estimates around 100,000 people protested in the capital against George Bush’s plan to send extra troops to Iraq. Meanwhile, a Senate committee held a hearing to confirm Admiral William Fallon as Mr Bush’s top commander in the Middle East. The main topic of conversation was Iran.

The former White House press secretary, Ari Fleischer, testified for the prosecution (under an immunity deal) at the trial of Lewis “Scooter” Libby. Mr Libby, a former chief of staff to Dick Cheney, has pleaded not guilty to charges that he obstructed an investigation into the leaking of a CIA officer’s name to the press.

More bad news on AIDS. Trials of a vaginal microbicide called cellulose sulphate, which was intended to stop women becoming infected, were halted when it was found that those receiving the treatment were more susceptible to infection, rather than less so.

A shaming report

An official inquiry into hundreds of murders of opposition activists, priests and journalists in the Philippines concluded that the army killed most of them. But it rejected claims by human-rights groups that top military chiefs had sanctioned the murders.

Bangladesh’s High Court ordered that elections in the country could not be held for three months, when it expects an overhaul of the election process to be completed. The country’s election commissioners resigned as part of the reform process. An election scheduled for last month was postponed amid protests that the ballot would be rigged.

Six policemen and a civilian were killed by a roadside bomb in eastern Sri Lanka, the scene of recent fighting involving rebel Tamil groups.

Nepal’s prime minister, Girija Prasad Koirala, pledged that the country would be a federal state in the future. Eight people have died in protests by southern Nepalese demanding the change over the past couple of weeks.

King Hugo

Venezuela’s National Assembly granted powers to President Hugo Chávez to legislate by decree for the next 18 months. See article

Reuters

The first video images of Fidel Castro, Cuba’s ailing president, released since October showed him looking stronger though still frail, and chatting with Venezuela’s Mr Chávez. Mr Castro’s health is a “state secret”, but he is said to have suffered complications after intestinal surgery.

Canada’s government said it would pay C$11.5m ($9.8m) to Maher Arar, a Canadian software engineer who was detained by American officials and flown to Syria where he was tortured. An inquiry found that Canadian officials had falsely told their American counterparts that Mr Arar was a terrorist.

Ecuador slipped towards mob rule. Thousands of protesters, organised by the new president, Rafael Correa, stormed the Congress, where a majority of newly elected legislators are opposed to plans for a constituent assembly.

Business this week: 27th January – 2nd February 2007

Business this week

Feb 1st 2007
From The Economist print edition

The New York Stock Exchange and the Tokyo Stock Exchange announced an alliance. The partnership covers trading-systems technology, investor services and regulation and is the latest expansive move into foreign markets by the NYSE, which is acquiring Euronext and recently took a stake in India’s National Stock Exchange. For Japan’s biggest stockmarket, the pact should help boost market confidence, which has been dented by a series of technical mishaps in its trading operations. See article

Citigroup agreed to buy Egg, an online bank, from Prudential, a British insurer, for £575m ($1.1 billion). Egg’s sale price is much less than the £950m Prudential had said it was worth a year ago when Egg’s minority shareholders were bought out. The bank made a loss of £145m last year, but Citigroup hopes that combining it with its own British consumer operations will prove a boon. See article

Deutsche Bank had a record year; its annual net profit rose by 70% to euro6 billion ($7.8 billion) in 2006, partly on the back of a resurgence in its investment banking business.

Climb every mountain

With $6 billion in development costs and a delay of some two years behind it, Windows Vista finally went on sale to consumers. Microsoft’s latest operating system, its first since XP in 2001, has better security and new navigational designs. Bill Gates, the company’s chairman, promised PC users that “the wow starts now”; analysts said they would sooner wait for Vista’s sales figures.

Dell’s chairman, Michael Dell, returned to his old job of chief executive after Kevin Rollins was dismissed. The computer-maker is trying to reboot its business in response to sliding market share and slowing growth. Investors were heartened by the news. See article

Google’s fourth-quarter net income nearly tripled compared with a year earlier, to $1 billion (its annual profit for 2006 doubled to $3.1 billion). The company is prospering from website advertising revenue; the number of paid clicks rose by 61% in the quarter. However, Google’s share price came under pressure after analysts cautioned its future profits might be hurt if it over-extended its new business.

US Airways withdrew its hostile $9.8 billion offer for Delta Air Lines after Delta’s creditors threw their support behind the bankrupt carrier’s reorganisation plan. Delta and its pilots’ union insist the company has a future as an independent airline, but the bid has raised speculation about more attempts at consolidation in the industry.

The empire strikes back

India’s Tata Steel beat Brazil’s CSN in the bidding for Corus, an Anglo-Dutch steelmaker, so creating the world’s fifth-largest steel company. Formed in 1999 from the remnants of British Steel, Corus is India’s biggest foreign takeover. But Tata’s share price fell sharply amid concern that the price it is paying, £6.2 billion ($12.2 billion), is too high.

US Steel said its annual net profit last year rose by more than 50%, to $1.4 billion. The company’s European operations helped compensate for a rise in cheaper steel imports and falling demand from carmakers in America.

Altria made a long-awaited decision to spin off Kraft Foods. The idea was first mooted more than two years ago, but was delayed while Altria fought litigation about its Philip Morris tobacco business. Kraft’s sales have been languishing of late, partly because of the trend towards healthier foods; the decision to divest the company will put an additional 1.5 billion of its shares in the market.

Ford reported an annual loss of $12.7 billion, its biggest ever, on January 25th. The carmaker is suffering from a persistent decline in sales and is busily restructuring itself. Meanwhile, General Motors said it would delay announcing its results because of accounting errors.

Manchester won the competition to host Britain’s first Las Vegas-style “super-casino”. The city was chosen by the independent Casino Advisory Panel over more high-profile bids, including one led by Philip Anschutz, an investor, for a casino at London’s Millennium Dome.

Hank Paulson, America’s treasury secretary, told the Senate Banking Committee that he would like eventually to see a “fully market-determined, floating Chinese currency”. The new Congress has made no secret of its irritation at China’s stance on trade and exchange rates.

Shopaholics

America’s GDP grew at an annualised rate of 3.5% in the fourth quarter, which was stronger than expected (the economy grew by 3.4% for the whole of 2006). A surge in consumer spending, helped by falling energy prices, boosted the figure. See article

Politics this week: 3rd – 9th February 2007

Politics this week

Feb 8th 2007
From The Economist print edition

Reuters

The Intergovernmental Panel on Climate Change, whose job it is to try to assess what is happening to the atmosphere, published its fourth scientific report on February 2nd. It concluded, in terms somewhat stronger than the third report, that things are indeed getting hotter, and that mankind is, indeed, to blame. What to do about it will be addressed in other reports to be published later this year. See article

The European Commission said carmakers should be forced to increase the fuel efficiency of new cars by 20% within five years. Car companies said the target was an arbitrary figure and would lead to job losses in the EU as production moved elsewhere. See article

Russian prosecutors charged Mikhail Khodorkovsky, the former boss of the Yukos oil company and a critic of President Vladimir Putin, with laundering over $20 billion. Mr Khodorkovsky, who is already serving an eight-year prison term for fraud, said the new charges were designed to prevent his early release.

Italy’s foreign minister, Massimo D’Alema, denounced as “unfortunate outside interference” a letter to an Italian newspaper from the ambassadors of America, Australia, Britain, Canada, the Netherlands and Romania. The envoys had called on Italy to give greater support to the NATO mission in Afghanistan. See article

Two French Muslim groups sued a satirical magazine for defaming the Prophet Muhammad by reprinting cartoons first published last year in Denmark. Nicolas Sarkozy, France’s centre-right presidential candidate, gave his support to the magazine.

Some 160,000 turkeys were gassed at a farm in Suffolk to stop Britain’s worst outbreak of bird flu from spreading. See article

Put it in perspective

Flooding in Jakarta killed dozens of people and forced 340,000 to flee their homes. Indonesia is already struggling with an outbreak of dengue fever and is still grappling with bird flu, which has killed five people since the beginning of the year.

Thailand’s military-backed government sacked the national police chief, ostensibly for failing to catch those who planted bombs in Bangkok on New Year’s Eve. Separately, the government decided to reopen Bangkok’s old airport, Don Muang, while it fixes the many faults found at the $4 billion Suvarnabhumi airport, opened only five months ago.

Vietnam’s government unveiled plans for a $33 billion rail link between the capital, Hanoi, and Ho Chi Minh City in the south.

The design for a 40km (25-mile) atom smasher that will cost $8.2 billion was unveiled at a meeting in Beijing. Physicists want to discern one overarching set of laws that govern the universe and say the machine will help them make the discovery. The International Linear Collider, as it is known, will not start up until 2019 at the earliest and could be built in America, Japan or Switzerland.

Adding it all up

George Bush sent his budget to Congress. The $2.9 trillion request asks for more funding for the military and reduces spending on health care and other domestic programmes over five years. It also forecasts reduced federal deficits that eventually reach a surplus in 2012. Sceptics wondered how this could be twinned with Mr Bush’s request to extend his tax cuts. See article

Rudy Giuliani confirmed he was entering the presidential race. Although he did not make a formal declaration, the former mayor of New York filed the usual campaign papers and told a TV interviewer that “I’m in this to win”. See article

The Senate was embroiled in debate on Mr Bush’s policy on Iraq. Several resolutions ranging from support to outright condemnation of Mr Bush’s plans have been produced and the parties are negotiating over which can proceed. See article

Dangerous digs

An explosion killed 32 miners at a rudimentary coal mine in north-eastern Colombia. Days later, a second blast at another mine in the centre of the country killed eight.

AFP

In Bolivia, more than 20,000 miners marched through the capital, La Paz, in protest at plans by Evo Morales, the country’s socialist president, for a sharp rise in taxes on mining. The government backtracked, saying the tax rise would apply to large privately owned mines and not to small mining co-operatives.

Opponents accused Argentina’s government of fiddling the country’s in
flation figure after a senior statistician was sacked and her replacement changed the methodology of the consumer-price index. The government said inflation in January was 1.1%; economists said it was 1.5-2%. See article

More than a dozen gunmen attacked two state law-enforcement offices in the Mexican resort of Acapulco, killing seven people while videotaping the assaults. President Felipe Calderón sent some 8,000 troops to the area last month to crack down on drug-trafficking and organised crime.

A new mission to accomplish

The killing in Iraq continued unabated, with at least 130 people, mostly Shias, dying in a single suicide-bombing in a Baghdad market. A “surge” of extra American troops into Baghdad was set to begin in an effort to quell the sectarian violence.

The Palestinian president, Mahmoud Abbas, head of the Fatah party, and his Islamist rivals from Hamas, represented by their leader-in-exile Khaled Meshal, started talks in Mecca to end weeks of factional fighting in the Palestinian territories.

Egypt’s president, Hosni Mubarak, ordered a band of Muslim Brothers, including the group’s number three, to be tried in a military court. Lawyers said that 165 members of the Brotherhood, the country’s most popular opposition group, have been detained since December.

In Mogadishu, the capital of Somalia, sporadic night-time mortars and rockets were launched at the presidential palace, hotels and the port, presumably by remnants of the Islamist fighters, most of whom were routed a month ago by Ethiopian troops. An African Union peacekeeping force has yet to be assembled. See article

Reuters

At the end of an eight-country tour of Africa, China’s president, Hu Jintao, said he would try to cut his country’s $3 billion trade surplus with the continent.

Business this week: 3rd – 9th February 2007

Business this week

Feb 8th 2007
From The Economist print edition

Vornado Realty Trust withdrew its bid for Equity Office Properties, leaving the way clear for shareholders in America’s largest real-estate investment trust to accept Blackstone Group’s offer of $38.9 billion. The transaction sets a new record for a leveraged buy-out, underscoring the relentless takeover of public companies by private-equity firms. See article

Blackstone Group was one of four private-equity firms making up a consortium that expressed a keen interest in acquiring J. Sainsbury. The British supermarket chain has a market value of around £9 billion ($18 billion); if successful, the leveraged buy-out would be Europe’s biggest. See article

London’s latest landmark, the Gherkin, was sold for £600m ($1.2 billion), a record for the capital’s booming commercial-property market. The seller, Swiss Re, will remain in the building as its main tenant until at least 2031.

Steve Jobs called for an end to digital-rights management technology that protects music sold over the internet. DRM was insisted upon by big record labels, but Mr Jobs thinks it is inhibiting the growth of the online-music market. Some observers reckoned that Apple’s chief executive was trying to deflect criticism aimed at iTunes’ own FairPlay system from regulators in Europe. See article

The long and winding road

Meanwhile, a settlement was reached in a trademark dispute between Apple and Apple Corps, the Beatles’ music company. The agreement gives Apple ownership of all the “Apple” logo trademarks, but the computer-maker will license some trademarks back to Apple Corps. The two sides have been arguing since the early 1980s; fans now hope they can come together and make the Beatles’ songs available on iTunes.

There was more bother for YouTube over copyright infringement. Viacom, the owner of MTV, asked that all of its content be removed from YouTube’s website after the two sides failed to reach a distribution deal. Meanwhile, Jeff Zucker chose his first day as boss of NBC Universal to chastise YouTube for failing to address media copyright on video clips.

Eastman Kodak unveiled its line of desktop printers and low-cost ink cartridges. Troubled Kodak is hoping its new products will encroach on Hewlett-Packard and others by addressing consumers’ gripes about the cost of replacement cartridges for their printers (by weight, the ink within them costs more than caviar).

A case to answer?

A three-man panel of a federal appeals court in San Francisco ruled that the biggest sex-discrimination case in American history could proceed against Wal-Mart as a class-action lawsuit. The suit was brought on behalf of past and present female employees, who claim the retailer is biased towards men in pay and promotion. An estimated 2m women could join it. Wal-Mart fulminated against the legal basis of the case and said it would fight all the way to the Supreme Court if it had to.

The long-running takeover battle for Endesa moved closer towards completion when the board of the Spanish energy company recommended E.ON‘s latest €41 billion ($53 billion) offer to shareholders.

HSBC said that high rates of bankruptcy in America’s subprime mortgage market meant it would take a much higher charge than expected (estimated to be around $10.5 billion) on bad debts for 2006.

With the threat of huge lawsuits against cigarette-makers seemingly receding in the United States, Britain’s Imperial Tobacco decided to enter the market, agreeing to buy America’s Commonwealth Brands for $1.9 billion.

Chung Mong-koo, the chairman of Hyundai Motor, received a three-year prison sentence for embezzling company funds. The jail term surprised those used to the comparatively light sentences handed down in South Korean corporate cases. However, the court decided not to send the head of the country’s biggest carmaker to his cell straightaway, citing the need to protect the national economy during his appeal. Investors have been pushing for more transparency in the country’s chaebol.

Still full of eastern promise

The Shanghai stockmarket recovered somewhat after losing 11% of the value of its domestically traded shares in five days. The index surged last year, as improved earnings at Chinese companies spurred investor confidence. With one senior Chinese politician now warning that the market was overheated (and that most of the index’s companies should be delisted), some pondered if this was the inevitable end to a Chinese bubble. Cooler heads said it was just a market correction. See article